Are you prepared for the new annual leave year?

01 December 2019

This article was featured in the December 2019 - January 2020 issue of the magazine. 

Christina Holloway, director of service excellence at Moorepay, timeously discusses the importance of annual leave and why payroll and HR need to work in tandem

January can be a dull and depressing time: cold, dark and, for many, something of a low after the highs of Christmas and the New Year. But it’s also a time to look forward, detox and make plans for the year ahead. 

For employees, January is particularly important because, for most firms, it marks the renewal of annual leave entitlement. Holiday entitlement and how effectively requests are managed directly impacts employee satisfaction, particularly for millennials who are said to value experiences more than other age groups ( 

From a business perspective, the financial, reputational and operational impact of getting holiday planning wrong can be significant as we saw in 2017 when Ryanair were forced to cancel between forty and fifty flights every day for six weeks due to a problem with managing pilot’s holidays.

Our recent Engaged employer report (‘the report’) ( highlighted that after financial benefits, flexibility was most highly valued by employees. Holiday is of paramount importance in this respect and goes hand in hand with flexibility and benefits. 

Employees need to feel valued; giving them flexibility and choice is crucial to empowering them in their role. Some 13% of UK employees surveyed for the report named holiday buy, sell and trade schemes as important for their employer to offer; the seventh most commonly cited benefit of all. 


...the financial, reputational and operational impact of getting holiday planning wrong can be


Flexibility of holiday allowance gives employees increased freedom to juggle competing life demands. It can also be used to flag potential wellbeing concerns and mitigate levels of absence. It can signpost those stressed about money or concerned about workload (if they sell lots of holiday) and could be an indicator for those who are losing interest in the workplace, for example if they buy lots of holiday and take a significant amount of sick days. Businesses that allow employees to buy and sell holiday may find it has a beneficial effect on their recruitment and retention as it flexes to the needs of individuals at different times of their lives. 

However, managing this freedom can be challenging and it requires a robust and well-managed system. Employers need to ensure teams have adequate resource at all times, whilst also giving employees an element of choice over when they take their annual leave. When selling holiday, employers must ensure that the individual still receives and takes the statutory minimum amount of days (28) to which they are legally entitled. Similarly, when buying holiday, their salary must remain above the minimum wage. Employers must therefore account for one-off buying of holiday entitlement over several months to ensure compliance.

Human resources (HR) and payroll teams need to stay on top of employee requests and have simple and structured systems to handle this process. Self-service applications can help with the authorisation process, which employees now expect to be almost instantaneous, as they try to coordinate booking their holiday. 

Other significant parts of the holiday process include handling the calculation of National Insurance contributions, tax and carry-over days (if applicable), which can be more complex if the company allows individuals to buy and sell holiday. Technology can help with calculating holiday entitlement and pay, but HR and payroll specialists also have a duty to oversee this process and ensure these factors are both carefully calculated and keep the welfare of individual employees at the forefront of considerations. 

This is one area where payroll and HR need to work in tandem to ensure processes are manageable. It is also a key opportunity to gather greater insight into employees’ wellbeing and engagement levels. 

As UK businesses face some of the most pressing recruitment and retention challenges in living memory, getting the basics right is crucial to creating a positive employee experience. This includes calculating holiday entitlement correctly and making it easy for employees to request time off. Employers who take this a step further – by offering holiday buy and sell schemes and self-service technologies – will reap the benefits of productivity boosts, increase appeal to prospective employees and reduce churn.